Brexit Too Great A Risk For CFOs

Financial leaders are firmly against the UK leaving the EU


As the date of the EU referendum approaches, rhetoric on either side is being amped up. The leave camp is making ground in the polls, having decided to focus their campaign on immigration, moving slightly away from how silly laws from Brussels like fishing limits and human rights are preventing people from indulging in the simple pleasures in life.

Speeches are one thing, but if polls are to be believed, the remain camp needs to be doing more. The latest ICM poll has Leave on 48% (+1), Remain on 43% (-1) and Don’t Knows still on 9%, which equates to 53% vs 47% lead for Leave. A YouGov poll also found a 4-point move to Leave.

While Remain has lost some support among the general public though, support from CFOs and big business has remained relatively constant. The last several Deloitte surveys have seen CFOs consistently say that remaining is the best option, and the latest Q2 survey has produced similar results, with 75% favoring the UK remaining in the EU, up from 62% in Q4 2015 and 74% in Q2. Just 8% said that UK business would benefit from leaving the EU - up from 6% in Q4 2015 and 2% in Q2 - which, although still a significant minority, suggests that some who were previously undecided have made their mind up in favor of leaving.

When asked in the Deloitte survey, which questioned 120 CFOs of the FTSE 350 and other large private companies, how they believed EU membership benefited the UK economy and UK businesses, 89% of respondents said membership has helped UK export performance, 86% said it has attracted foreign direct investment (FDI), 71% said membership has contributed to the success of UK financial services, and 68% said it has boosted the UK’s influence and connections with the rest of the world. It also doesn’t appear that the immigration article has much impact, with 78% of CFOs still saying the UK benefits from the free movement of people.

The cohesion of opinion around the business benefits is matched only by that of leading economists as to how bad leaving could be, with 88% of the 600 surveyed by Ipsos Mori for The Observer saying it would impact badly on Britain's growth rates over the next five years

Whatever the strength of any arguments in favor or against, CFOs are naturally risk-averse by virtue of the nature of their profession, and they are always going to come down on the side of the argument where there is least uncertainty. And there is a hideous degree of uncertainty around what Britain would look like post-Brexit. Ian Stewart, chief economist at Deloitte, said: ‘A fog of uncertainty has descended on the corporate sector. Perceptions of financial and economic uncertainty are back to levels last seen in early 2013 as the euro crisis abated.’ Even the news that the polls are narrowing has sent the pound sinking. The pound (GBP) dropped almost 1% against the dollar and the euro, and HSBC’s prediction that the pound could fall by 20% in the event of a Brexit is looking more and more likely everyday.

The challenge for Eurosceptics is that they have to remove this element of uncertainty and come up with a clear picture of what the UK will look like, something they cannot do as they have either no idea or different ideas to everyone else in the campaign. The argument to leave the EU is currently endorsed by Michael Gove, Boris Johnson, Marine LePen, Donald Trump, and Vladimir Putin, a group of people who are disliked by the majority of people. So the only real certainty there is around what Britain will look like is that it will be dystopian. And CFOs don’t really real like the idea of a dystopian future much more than they like that of an uncertain one. The only question is whether their attitudes will filter down to the general population. 

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